Business Finance Australia Question Answer 2022

Running head: BUSINESS FINANCE
Business Finance
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BUSINESS FINANCE
Table of Contents
Part 1:.........................................................................................................................................2
Answer to a):..............................................................................................................................2
Answer to b):..............................................................................................................................2
Part 2:.........................................................................................................................................3
Answer to a):..............................................................................................................................3
Answer to b):..............................................................................................................................3
Answer to c):..............................................................................................................................4
Part 3:.........................................................................................................................................4
Answer to a):..............................................................................................................................4
Answer to b):..............................................................................................................................4
Part 4:.........................................................................................................................................5
Answer to a):..............................................................................................................................5
Answer to b):..............................................................................................................................7
References and Bibliography:....................................................................................................8
Appendices:..............................................................................................................................10

BUSINESS FINANCE
Part 1:
Answer to a):
The above calculation mainly helps in detecting the overall average return of five
stocks and one index over the period of three years. From the relevant calculation, it has been
detected that the returns of the ASX200 was mainly higher than NAB, WBC and ANZ
stocks, whereas the performance of AGL and QAN exceeded immensely in comparison to the
index. The return of ASX 200 was at the levels of 0.10, while the financial sector stock
accumulated lower returns, where NAB achieved only 0.09, WBC obtained 0.09 and ANZ
got .0.07 returns for the period of three years (Chandra 2017).
Answer to b):
The calculation in the above figure indicated about the portfolio return with equal
weights which has been derived after making relevant calculations. The equally weighted
portfolio return is mainly calculated by multiplying the portion of the stock weights with the
returns of the stock and then adding all the stock listed in the portfolio to derive the actual
return over the period of three years. The calculations have stated that overall average return
of the equally weighted portfolio is at the level of 0.81, which is higher than the ASX 200
return (Williams and Dobelman 2017).

BUSINESS FINANCE
Part 2:
Answer to a):
The information depicted in the above table stated about the variance and standard
deviations of each stock and index for the duration of three years. The standard deviation of
the stocks and index is mainly calculated by square rooting the values of the variance
obtained from the calculations (DeFusco et al. 2015). Therefore, the calculation of the
standard deviation has indicted that the volatility conditions of the stock is relatively higher in
comparison to the index, where the index value is at the 3.25, while the values of the stock
ranges from 4.74 to 9.13. The derivation of the standard deviation mainly helps in detecting
the volatility or risk associated with the price movement of a particular stock.
Answer to b):
The calculation has mainly stated that the standard deviation of the equally weighted
portfolio is at the levels of 4.29, which is lower than the values of individual stock. This
mainly states that the portfolio risk is mainly lower than individual stock, as it reduces the
risk components of the investment.